This is what they call an "existential threat" in the MBA texts, where your very business is threatened by tectonic shifts in the landscape around you. For all the success of their server, database and gaming products, more than half the company's revenue comes from the Windows and Business divisions (the latter of which is nearly all Microsoft Office). Even while the stock has gone nowhere, the one certainty has been those divisions have continued to grow through good (Windows 7) and bad (Windows Vista).

But PC replacement cycles have been growing longer for quite awhile as real-world performance improvements of Intel's chips has slowed, the global economy has been beaten up more than once, and the marginal benefit of each upgrade cycle has gotten smaller compared to the prior one.

In and of itself, that might not be a huge problem were it not for the mobile revolution. First, in the form of smartphones as Blackberry gave way to iPhone and Android. And now, via tablets, which threaten not to eliminate the PC, but rather to displace it for the majority of people, the majority of the time.

Bill Gates understood this moment was going to arrive before most people. In fact, he held up a prototype tablet at the now-defunct Comdex trade show back in 2001 and boldly proclaimed: "The tablet is a PC that is virtually without limits -- and within five years I predict it will be the most popular form of PC sold in America."

Of course, that didn't happen, but Microsoft was undaunted. The company was at it again before Apple launched the gigantically successful iPad in 2010. Microsoft's project, called Courier, was slated to ship before iPad and might have blunted Apple's success. Instead, infighting at Microsoft led to delays and eventually to the cancellation of Courier. So instead of leading from the front, Microsoft now comes from behind with the Surface tablet, which launched to much fanfare October 25, to coincide with the debut of Windows 8.

Surface represents a huge bet for Microsoft as it is branded hardware that effectively competes with products from Dell, HP, Acer, Lenovo, Samsung, et al. -- the very companies Microsoft has relied on for the past decade to sell Windows. And these OEMs aren't entirely happy about it. Acer CEO JT Wang even warned Microsoft back in the summer: "We have said [to Microsoft] think it over. Think twice. It will create a huge negative impact for the ecosystem and other brands may take a negative reaction. It is not something you are good at so please think twice."